Browsing Doctoral Degrees (Economics) by browse.metadata.advisor "Fourie, J."
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- ItemLessons from South African bank failures 2002 to 2014(Stellenbosch : Stellenbosch University, 2019-04) Havemann, Roy Charles; Du Plessis, S. A.; Fourie, J.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Economics.ENGLISH SUMMARY : This study draws lessons from recent South African financial history. The period covers the 2002/3 small bank crisis, the 2008 global financial crisis and the collapse of African Bank in 2014. During the small bank crisis, twelve banks experienced runs and a further ten deregistered. In chapter 2, I use a monthly bank-level data set to show that the failing banks were all solvent, but that their funding structure made them fragile and susceptible to a confidence shock. The central bank did not intervene to provide liquidity to the affected banks, worsening the crisis. The lessons are that bank failures can impose both short- and long-term economic costs, monetary policy can have financial stability implications, and that a credible and clear bank resolution strategy is critical. South Africa did not experience any bank failures during the 2008 global financial crisis period. In chapter 3, I show that this is partly because the banking regulator increased capital adequacy ratios during the pre-crisis period, in response to rapid credit growth. The lesson is that macroprudential tools can reduce credit growth and dampen overheating financial cycles. In chapter 4, the successful bail-in of creditors in African Bank during 2014 provides lessons on the intended and unintended consequences of post-global financial crisis bank resolution tools. Money-market funds ‘broke the buck’, triggering significant redemptions and some financial spillovers. The authorities required discretionary liquidity restrictions and market-making facilities. The lesson is that – correctly applied – new resolution tools can support the sustainable restructuring of a failing bank, reduce financial spillovers, and minimise taxpayers losses. The conclusion points to broader lessons from the whole period, particularly the primary importance of a coordinated monetary and financial stability policy framework.